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Holly LaFon
Holly LaFon
Articles (9409)  | Author's Website |

David Einhorn Nears Record Losses With September Decline

Greenlight down for the month due to concentrated bets

David Einhorn (Trades, Portfolio)’s year has gone awry, with his hedge fund Greenlight Capital reporting mounting losses for the month of September that put him on course for his firm’s worst annual performance.

Einhorn’s investment returns slumped 1.8% for the month for a 22.3% loss for the year. Bloomberg has reported a steeper loss in his main fund, at 26.1%, citing an investor update. Meanwhile, the S&P 500 Index gained 8.17% for the same period.

The losses stem from both his long and short positions. Einhorn, a value investor, concentrated more than half his public long portfolio in the second quarter in securities he considered undervalued but that have stumbled year to date. General Motors Co. (NYSE:GM), his largest stock at 26.59% of his public portfolio, declined 13.78% year to date. Brighthouse Financial Inc. (NASDAQ:BHF), his second largest position, has fallen 24.47%, while Mylan NV (NASDAQ:MYL), his third largest, tumbled 13.78%. Green Brick Partners Inc. (NASDAQ:GRBK), the fourth largest pick, is down 10.53%.

Physical gold, one of his fund’s five largest positions overall, also sank this year. The SPDR Gold Shares ETF (GLD) declined 8.2% year to date.

His short positions added to the pain. In 2017, Einhorn’s biggest detractors were short positions in a “bubble basket” that includes Amazon (NASDAQ:AMZN) and Netflix (NASDAQ:NFLX), both of which have soared year to date. Caterpillar (NYSE:CAT), another short in Einhorn’s portfolio, rose in September but has declined slightly for the year to date. Tesla would have boosted returns in September after a slide, but the stock has since rebounded to remain down only slightly for the year.

Einhorn’s focus on business fundamentals served him well in the initial years of his firm when he turned in only one down year in the decade following 2004. But in 2015 he suffered his worst year ever when the fund sank 20.2%. He eked out single-digit gains in 2016 and 2017.

Although Einhorn seemed to question his value investing approach last year, he expressed hope for its return to glory in his second quarter conference call.

“This has been a frustrating environment for us and for value investing style,” he said. “AllianceBernstein recently reported that value investing strategies are performing in the bottom percentile since 1990. Reality is that the market is cyclical and given the extreme anomaly, reversion to the meanship happens sooner rather than later, we just can’t say when."

About the author:

Holly LaFon
I'm a financial journalist with a Master of Science in journalism from Medill at Northwestern University.

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